Canadian Issuers Help Green Bonds Reach $36 Billion in 2014

Canadian Bank Notes

By Arman Kazemi

January 22, 2015

The global green bond market ended 2014 showing breakout growth, with Canadian issuers playing an active role.

According to the Climate Bonds Initiative, these climate-friendly loan packages capped the year with over USD $36 billion in global value.

The year also marked the largest single-year growth since the first green bonds were issued in 2007, more than tripling 2013’s total of USD $11 billion. This brings the total amount of outstanding green bonds to just over $53 billion at the end of 2014, according to the report.

Green bonds are fixed income securities that help finance an array of projects and investments, similar to traditional bonds, but with an environmental focus.

The principal issuers continue to be development banks, such as World Bank and International Finance Corporation. These organizations launched green bonds a decade ago, and accounted for 44 per cent of the market last year.

According to the CBI report, however, “green corporate bond issuance was the biggest catalyst for the market explosion,” with offerings from brands like Toyota. At the same time, the report notes, “the final figure was boosted by a late flurry of green municipal bonds.”

It explicitly credits Ontario, along with 11 U.S. states, for “heating up” the green municipal market.

In September, Ontario established a CAN $500 million, four-year bond earmarked for a broad range of projects including the Toronto Crosstown Light Rail and other clean energy and conservation initiatives. The Ontario bond was five times oversubscribed, “which speaks to the latent appetite for high-quality Canadian dollar green bonds,” says a report by the University of Ottawa-based research group Sustainable Prosperity.

According to the same report, at a combined value of $28 billion, Canadian issuers in the public and private sector make up five per cent of the global total of climate-friendly bonds.

Two other large-scale offerings helped announce Canada’s presence on the global green bonds scene, going from nothing to $1.4 billion in the course of the year.

TD Bank became Canada’s first private sector issuer of green bonds when it put up $500 million last March. Two months earlier, Export Development Canada, a crown corporation, issued $335 million in bonds for projects that “preserve, protect or remediate air, water or soil or help mitigate climate change,” according to a CBC News article.

If last years figures weren’t indication enough, Sean Kidney, chief executive of CIB, promises an even bigger year for 2015: “We predict USD $100 billion of issuance in 2015 and green bonds to go mainstream in 2016.”